Still Standing v. Allen

2005 UT 46
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Still Standing Stable, LLC, No. 20040354
Plaintiff and Appellant,
v.
Ross L. Allen, Norma H. Allen, and F I L E D
Monastery of Our Lady,
Defendants and Appellees. July 22, 2005
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Second District, Ogden
The Honorable Roger S. Dutson
No. 020900959
Attorneys: David L. Arrington, Gretta C. Spendlove, Erik A.
Olson, Salt Lake City, for plaintiff
Timothy W. Blackburn, Mara A. Brown, Ogden,
for defendants
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DURHAM, Chief Justice:
¶1 In this case, plaintiff appeals the trial court’s award
of attorney fees for bad faith pursuant to Utah Code section 78-
27-56. We reverse.
BACKGROUND
¶2 In September 1998, Still Standing Stable, LLC (Still
Standing) purchased 170 acres of property in the Ogden Valley
from the State of Utah School and Institutional Trust Lands
Administration (SITLA). The information provided by SITLA
regarding the property read:
There is likely no access. Although there is
an ungraveled and unimproved road leading to
the property, it crosses privately owned
lands. Historical access may exist, but the
Trust Lands Administration is not
guaranteeing access to the property.

1 In the act repealing R.S. 2477, Congress included a
savings provision that preserved existing road claims: “Nothing
in this Act, or in any amendment made by this Act, shall be
construed as terminating any valid lease, permit, patent, right-
of-way, or other land use right or authorization existing on the
date of approval of this Act.” Federal Land Policy and
Management Act of 1976, Pub. L. No. 94-579, § 701(a), 90 Stat.
2743, 2786 (1976). Still Standing relies on this savings
provision to assert its Federal Revised Statute 2477 public road
claim.
No. 20040354 2
¶3 In February 2002, Still Standing filed a lawsuit
against neighboring property owners to establish access to its
property, asserting four legal theories: (1) easement by
implication; (2) easement by necessity; (3) the creation of a
public road under state law; and (4) the existence of a public
road under Federal Revised Statute 2477, 43 U.S.C. § 932 (1970)
(repealed 1976).1 Still Standing relied primarily on the opinion
of an expert witness, a registered land surveyor, who concluded
that a public road had historically run up to and across Still
Standing’s property and that easements by implication and
necessity existed.
¶4 The trial court denied the defendants’ motion for
summary judgment because it found that Still Standing’s expert
raised issues of material fact. At trial, the court also denied
the defendants’ motion for directed verdict. Nevertheless, while
the court indicated, at the end of Still Standing’s evidence,
that it believed the expert had stated his honest opinion, it
ultimately rejected his testimony as unpersuasive in the absence
of any historic or contemporary map, photograph, or other
evidence to support it. The trial court also rejected Still
Standing’s arguments based on federal and Utah statutes regarding
the existence of an historical road. Finally, the trial court
found that there was insufficient evidence to support Still
Standing’s arguments regarding the existence of an easement by
implication or necessity. Thereafter, the trial court concluded
that the defendants were entitled to an award of their attorney
fees pursuant to Utah Code section 78-27-56 because the
plaintiff’s complaint was brought without merit and in bad faith.
¶5 Among other findings of fact, the trial court made the
following findings that appear connected to its decision to award
attorney fees under section 78-27-56:
7. Quite incredulously to this Court,
Plaintiff purchased the affected property
without making any attempt to determine

3 No. 20040354
whether there was any legal access to the
property.
. . . .
12. The state, in advertising the affected
property for sale, stated that there was
likely no access, although its statement
could be construed to imply that if there was
access, it was certainly unclear, and that
any purchaser would be wise to check with the
adjoining property owners regarding the means
of access to and from the property.
. . . .
53. The Court finds that Still Standing
brought this action knowing it had no legal
right of ingress/egress to its land-locked
property, and that a suit was filed in the
hope that Plaintiff could persuade the Court
to act on a Motion, or that the Court would
fail to apply the evidence to the law, or by
some chance, that the Court would grant an
ingress/egress to it.
54. Plaintiff had been given clear notice
that there was probably no ingress/egress.
And then it has tried to come up with some
ingenious concepts and legal conclusions that
are totally unsupported by the evidence.
55. This filing is totally frivolous and
without factual or legal basis or merit.
. . . .
57. Plaintiff had an obligation to evaluate
the legal merits of this case before
continuing to promote its legal theories.
. . . .
61. However, Plaintiff did not adequately
evaluate the legal concepts that apply here,
nor did it honestly and objectively evaluate
the facts.

No. 20040354 4
. . . .
67. Because the Court has determined this to
be a frivolous action, the Court is awarding
attorneys’ fees and costs.
68. There was no sense of this case going to
trial and resulting in the defendant property
owners having to incur a great deal of
expense. That is as bad as taking property
from the defendants without any due process
or legal justification, and especially when
there was no substantial basis in fact or law
to proceed with this lawsuit.
¶6 Still Standing appeals the trial court’s award of
attorney fees but does not appeal the dismissal of its underlying
claims. We have jurisdiction pursuant to Utah Code section 78-
2a-3(2)(j) (2002).
ANALYSIS
¶7 The issue before us is whether the trial court erred in
awarding attorney fees to defendants under Utah Code section 78-
27-56. Section 78-27-56 provides, in relevant part: “In civil
actions, the court shall award reasonable attorney’s fees to a
prevailing party if the court determines that the action or
defense to the action was without merit and not brought or
asserted in good faith . . . .” Utah Code Ann. § 78-27-56
(2002). In order to award attorney fees under this provision, a
trial court must determine both that the losing party’s action or
defense was “without merit” and that it was brought or asserted
in bad faith. Cady v. Johnson, 671 P.2d 149, 151 (Utah 1983).
¶8 Here, Still Standing does not challenge the trial
court’s conclusion that its case was without merit. It argues,
rather, that the court either misapplied section 78-27-56 by
failing to make an independent bad faith finding or made such a
finding based on insufficient facts. Whether the trial court
properly interpreted the legal prerequisites for awarding
attorney fees under section 78-27-56 is a “question of law” that
we “review . . . for correctness.” Rushton v. Salt Lake County,
1999 UT 36, ¶ 17, 977 P.2d 1201 (holding that statutory
interpretation presents a legal question). The question of
whether, under the second prerequisite of section 78-27-56, a
claim was brought in “bad faith” is a “question of fact [that] we

2 “When challenging a district court’s findings of fact, the
challenging party must show that the evidence, viewed in a light
most favorable to the [district] court, is legally insufficient
to support the contested finding.” In re Sonnenreich, 2004 UT 3,
¶ 45 n.14, 86 P.3d 712 (alteration in original) (internal
quotation omitted). Here, Still Standing sufficiently marshaled
all available evidence.
5 No. 20040354
review . . . under a clearly erroneous standard.”2 In re
Sonnenreich, 2004 UT 3, ¶ 45, 86 P.3d 712. As discussed below,
to the extent that the trial court conflated the “without merit”
and “bad faith” requirements, we hold its conclusion to be
incorrect. To the extent the court made an independent finding
of bad faith, we hold this finding to be clearly erroneous.
¶9 Section 78-27-56 is “narrowly drawn and ‘not meant to
be applied to all prevailing parties.’” Id. at ¶ 46 (quoting
Cady, 671 P.2d at 151). While an action “must be meritless to
award attorney fees under section 78-27-56, the mere fact that an
action is meritless does not necessarily mean that the action is
also brought in bad faith.” Id. at ¶ 49 (citing Utah Dep’t of
Soc. Servs. v. Adams, 806 P.2d 1193, 1198 n.6 (Utah Ct. App.
1991)). “[A] finding of bad faith turns on a factual
determination of a party’s subjective intent.” Id. (citing
Pennington v. Allstate Ins. Co., 973 P.2d 932, 939 n.3 (Utah
1998)).
¶10 In this case, the trial court did not indicate a clear
basis for its finding of bad faith. It appears from the court’s
findings that it conflated the “without merit” and “bad faith”
requirements of section 78-27-56, believing that an absence of
legal merit meant that bad faith could be presumed. Our
precedent demonstrates that such an approach is incorrect and
that the trial court’s findings were insufficient to support an
award of attorney fees in this case.
¶11 In Cady, we reversed a finding of bad faith where the
plaintiffs failed to research an issue as instructed at a
pretrial conference, even though such research would have led to
the discovery that the plaintiff’s claim was meritless. 671 P.2d
at 152. More recently, in Sonnenreich, we stated that bad faith
constitutes a separate element under section 78-27-56 and
cautioned against intertwining the statutory “without merit” and
“bad faith” requirements. 2004 UT 3 at ¶ 49. We stated that “it
does not follow that simply because the [plaintiff] had no legal
foundation to bring the action that it was also acting in bad
faith.” Id. We reversed the trial court’s award of attorney
fees in that case because the trial court had failed to make the

No. 20040354 6
specific findings necessary to support a finding of bad faith.
Id. at ¶ 50.
¶12 In Sonnenreich, we further clarified that the “bad
faith” determination must be made independently of the “without
merit” determination by defining good faith, for purposes of
section 78-27-56, as maintaining: “(1) [a]n honest belief in the
propriety of the activities in question; (2) no intent to take
unconscionable advantage of others; and (3) no intent to, or
knowledge of the fact that the activities in question will
hinder, delay, or defraud others.” Id. at ¶ 48 (alteration in
original) (internal quotation omitted). “To establish a lack of
good faith, or ‘bad faith’ under section 78-27-56, a party must
prove that one or more of these factors is lacking.” Id.; see
also Chipman v. Miller, 934 P.2d 1158, 1163 (Utah Ct. App. 1997)
(reversing an order awarding attorney fees where the trial court
neither stated which of the bad faith factors applied nor
discussed any evidence supporting any factor). Thus, again,
without such further proof, lack of legal merit is insufficient
for an attorney fee award under this section.
¶13 The trial court’s finding of bad faith may be upheld if
there is sufficient evidence in the record to support a finding
that at least one of these three factors applies. Cady, 671 P.2d
at 152. Here, there is no evidence in the record that Still
Standing had the subjective intent to bring this action in bad
faith. The trial court’s finding that the action was frivolous
is insufficient to establish bad faith. While the trial court
found fault with Still Standing’s prepurchase investigation of
property access issues and with the adequacy of its legal
research before it filed a claim, the conclusion that the
plaintiff brought the action “knowing” it had no right of access
in the “hope” that the trial court would provide such access is
unsupported by the record.
¶14 Additionally, the trial court’s conclusion that Still
Standing was placed on “clear notice” by SITLA’s disclaimer that
“[t]here is likely no access” to the property ignores the
ambiguity created by the disclaimer’s statement that
“[h]istorical access may exist.” Given that the plaintiffs
brought a claim seeking to establish historical access, and given
that the court itself believed their expert witness to be honest
in his opinion that historical access existed, the evidence of
bad faith is inadequate. Further, there is no evidence in the
record that Still Standing intended to take unconscionable
advantage of others on this point. Nor is there any indication
that Still Standing engaged in dilatory tactics or other efforts

7 No. 20040354
calculated to harass the opposing party and drive up litigation
costs.
¶15 We also reject the defendants’ argument that, in
addition to the three bases for finding bad faith mentioned
above, this court in Cady introduced a fourth basis, which it
referred to as “self-induced myopia.” 671 P.2d at 152.
According to the defendants, this would allow a court to infer
bad faith from the “absolute lack of merit” of a plaintiff’s
claim. In fact, however, we recognized in Cady that although
“[p]laintiffs were clearly pursuing a meritless claim and better
preparation might well have disclosed that to them . . . that
conduct does not rise to lack of good faith.” Id. We therefore
disagree that Cady established a fourth factor and decline the
defendants’ invitation to do so here.
¶16 We again emphasize that in order to find that a party
acted in bad faith under section 78-27-56, there must be
sufficient evidence that one or more of the three Cady factors
existed. Id. We remind trial courts that the “reason for
awarding attorney fees [based on bad faith] is to punish the
wrongdoer, and not compensate the victim,” and that fees should
therefore be awarded only upon specific evidence of bad faith.
Jay Rosenblum, Standard of Review: The Appropriate Standard of
Review for a Finding of Bad Faith, 60 Geo. Wash. L. Rev. 1546,
1551 (1992). Because the trial court’s finding of bad faith was
clearly erroneous, and because it erred to the extent it
conflated the “without merit” and “bad faith” requirements of
section 78-27-56, we reverse the trial court’s order awarding
attorney fees.
CONCLUSION
¶17 We conclude that the trial court appears to have
incorrectly conflated the requirements of “bad faith” and
“without merit” under Utah Code section 78-27-56. Its bad faith
finding is unsupported by evidence in the record and is thus
clearly erroneous. We therefore reverse the order awarding
attorney fees to the defendants.
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¶18 Associate Chief Justice Wilkins, Justice Durrant,
Justice Parrish, and Justice Nehring concur in Chief Justice
Durham’s opinion.